- All things can be coded as capital with the right legal coding. So capitalism is often hailed as the best economic system that we could possibly have. Socialism collapsed in the early 1990s, and ever, since we've been told by politicians there is no alternative. And if you critique capitalism, people typically point to the Soviet Union, the former socialist world, and say there is nothing else that could possibly work. And yet when we look at the capitalist system as I described it, there's also something fundamentally wrong with the system. It is unjust. As one philosopher has put it when reviewing my book is that there is no possible theory of social justice, under which what I describe would not look as being fundamentally wrong. It is violating principles of fairness and the use of a common resource, which is our legal system. It is violating fundamentally concerns about how we distribute wealth but also power. And it's violating our sense of self-authorship as individuals who want to determine their own lives but are very often being dictated by other private actors what to do and what not to do, but also self-authorship as collectives, as democratically constituted polities that want to determine how we want to organize our societies and who should have what kind of rights. So I do think there is a fundamental need for reform, even if we are being pointed to the fact that enormous amounts of wealth have been created with capital. And that's of course true, but it's also capital that was coded in law in a social resource. It's not clear why so few should benefit so much more than everybody else from these advantages of the system. On top of that, I think we also have reached an important point with climate change where we have to ask ourselves whether the system that we have created is sustainable over time, and we have to look into the system to understand what it does and what it does not do for society at large. There is a system for which there is not a simple fix. It has grown over centuries in a highly decentralized fashion. Asset holders have found lawyers who have coded their assets in law and have mounted resources that they can use them again to hire better lawyers and code more assets in law. There's also a fundamental dilemma that I think we should recognize. To the extent that we want people to organize their lives amongst themselves in a highly decentralized fashion, and there's a lot to be said for that. We will always have this kind of tension that you have rules that maybe society will create for itself, for everybody. Everybody should be equal before the law, everybody should have the same rights under the law. But then we also have to adapt these rights and principles to a changing world around us. Trying to do this only top-down, through the legislature, will prove to be impossible, and I think would create very rigid systems. So adaptation in a decentralized fashion I think is not a bad thing, but the question is, who does it for what purposes? And I think here we have to find better solutions over time. What I would suggest, how we should fix the system, is basically by taking a page out of the script that the masters of the code have written for us over the last several centuries. It basically means looking very carefully at what gave them the comparative advantage over others, how they have harnessed the powers of a legal system, of the modules of the code of capital, and how they have used access to the coercive powers that have been centralized in states to create a comparative advantage for themselves, and then relax these special privileges a little bit, take them away, push back where it might hurt most. Find the soft spots where the system tries to expand beyond what is socially accessible. So what I'm suggesting in in my book essentially is a series of rather incremental steps to reconfigure the system. Capital already has a lot of privileges. With the right lawyers at your hand, you can code all kinds of assets in capital, but they're also always negotiating for some kind of exemptions. Rules that apply to everybody don't apply in exactly the same fashion for some people who have get an exemption. And I would just simply advocate for simple bright-line rules. Let's just stop giving further exemptions to capital, whether it's exemption in tax code, whether in bankruptcy code, in any other laws, we should really try to play by the same rules for everybody and there's no good argument to opt out. If there are extreme exceptions where you can make this argument, the burden is on the other side. The second suggestion I have is that we basically make sure that every everybody has to play by the rules that apply to everybody else. And that means we have to limit choice of law. Opting out of a legal system when you don't like it, when those rules are a little bit too costly for you, you just take the rules from a different jurisdiction, but you still are here, you're still doing business in this jurisdiction, in this country under the laws and with all the benefits one country has to offer. I'm not suggesting autarky, legal autarky or any other kind of autarky, but I think if we all picked and chose the laws by which we wished to be governed, we couldn't have a democratic polity. We couldn't live together effectively. So we have to think about how much we want to outsource this picking and choosing to some who will claim that this is better for the economic gains, but then the economic gains are not necessarily shared with everybody else. And it's not clear that we should make social resources, such as the legal system or the centralized means of coercion available for picking and for choosing. Similarly, I think private arbitration has benefits and costs. Private arbitration is wonderful when it's speedy and when experts sit over it and when both parties that have agreed to arbitration have roughly similar bargaining power. If arbitration is used by employers or by digital platforms, or phone companies to force millions of customers into arbitration where we don't know how to really go through this process, where people are unfamiliar, where the rulings are typically not publicized, and thus people don't have access to previous rulings to assess what the chances are that they might win or lose, that's actually not a good system of justice. In fact, statistics suggest that very few people ever go to arbitration if they're subjected to mandatory arbitration rules in such contracts. And so you're being stripped of rights that you would otherwise have if you were still able to go to a court of law. Third, I think we need rules that ensure that private parties that benefit from the code of capital also internalize the cost of their actions. That's of course a fundamental principle of economics, and many people would argue that property rights do just that. You allocate property rights to an agent who uses the good such that it will also be of value in the future, and will not simply abuse it or overuse it because that person wants to keep that good. But that's of course kind of naive because in capitalism very often, we extract all the resources that we can from one good and then move on to the next. Whether this is land, we just strip it of all the trees, and then we get a concession to cut down the trees from the next land. That might be actually more profitable than to preserve the land. And similarly, financial assets. We can push the limits of what is safe in a financial system and can hope that the central banks step in and make sure that the system doesn't crash and give us cash if we need it for the assets that nobody else wants to buy at a certain stage. So we have created a lot of mechanisms in our legal systems that actually allow private parties that harness the code of capital, the legal system, to push the risks of what they're doing to others. Classic example of course is also limited liability. Think about corporations. Shareholders are not liable for the obligations of the corporation, ever. They might lose what they put in if the company goes bankrupt, but they will not be liable for any of the cost. What I would suggest is if we're talking about known polluters, known issuers of brown assets, investors making still a lot of money by investing these kind of firms. I'm not sure that limited liability for these investors are still justifiable. We created this mechanisms in the 19th century in an age of capital scarcity, but it's not clear that we want to maintain that principle for investors in a world where we have to make a transition to a more climate-consistent economic system. We may also want to think about how private actors could monitor capital more effectively. And there are lots of tools that we have used in the past for different purposes. Some have never changed, but some have been pushed back. This would include giving private parties incentives to sue. Then you would leave final decision to the courts, which you may want to do sometimes, maybe not always, but it's one avenue to say you get treble damages if you take on these people. Or we offer other incentives for private parties to take on actions like that where the government would be overburdened to take care of all of this. And then at a very fundamental level, I will say something that is a sacrilege for many, which is to say, I wanna roll back legal certainty. Legal certainty is something that the private sector always wants, in particular, the financial sector. And whenever the government says it might regulate this or regulate that, the government of course being a democratically legitimized legislator or even a regulator, the financial sector will say, "We need legal certainty, otherwise we can't do our calculations." But they're basically banking on legal certainties, it's like a blank check that we write. You can do whatever and we will enforce whatever you want to create, whatever the effect is on the system at large. Taking away the legal certainty would also make it questionable whether all the assets that have been created will be actually enforceable in a court of law. And if there weren't, there might not even be created. The common law that is sort of the source of the law for so much of the capital that we are seeing floating around the globe. It used to have a rule that wagers which are speculative contracts are not enforceable in a court of law. You don't sanction them. That's nothing to do with criminal law. The state doesn't intervene. It just says, "You know what? You cannot have our enforcement powers for these kind of activities." That changed not so long ago. It was only in 2000 that in the United States the law explicitly said that speculative assets, derivatives for example, are fully enforceable in the law. And you could see the increase in the markets going step by step with this. So it tells you again how important the law is for creating value. So in sum, what I'm suggesting is what I would call strategic incrementalism, understanding the system, how it works, and trying to regain policy space by rolling back some of the privileges that capital has enjoyed without necessarily fundamentally altering the system. That's if you want a weakness in my approach. I'm not calling for a revolution. I'm calling for transformation through incremental change. And I would argue that well-designed strategies that take away some of the privileges that have been granted, or taken over centuries, might actually be system transformative in ways that are difficult to predict. So it's not clear where that system would necessarily go, but I'm basically trying to contain the cost and most importantly to open new policy space so we could redesign the system in a different way or create new institutions, create an opening for alternative ways of doing business, for alternative ways of organizing society. We haven't solved this issue yet, and I'm not claiming that we know exactly what to do. We have to diagnose the system first and understand how capitalism has been created, and how capital has been coded, how wealth has been created with the social resource, our legal system. And what we need to do to create a more level playing field that would be more consistent with our principles of democracy, with principles of social justice, and, perhaps most pressing in our days, with the need to adapt our legal and economic system to the challenges of climate change.